Afternoon Links 1-4

Jan 4, 2010 20:46 UTC

Living on nothing but food stamps (Deparle/Gebeloff, NYT) The safety net of last resort: 2% of U.S. households report zero income other than a food stamp card.

Twenty years on Japan is still paying its bubble era bills (Economist) Heard on the Street also writes today that Japan is looking at its third consecutive lost decade. Copious amounts of deficit spending and money printing hasn’t worked for Japan. It won’t work for us.

Petition halts Iceland’s repayment plan (UPI) Icelanders want bank creditors — in this case foreign depositors — to eat the loss of bank failures. Probably sensible. Depositors were foolish to chase returns in Iceland to begin with. Putting Icelanders into debt slavery to pay them off does little good.

Lessons learned but not applied (Simon Johnson) Summers/Geithner know the right prescription to handle bank failures. They just aren’t willing to follow it themselves… (ht Walker Todd)

Real estate in Cape Coral is far from recovery (Goodman, NYT) Another foreclosure tour. Notes that busted homeborrowers often leave lots behind when ditching their house. See again: trash-outs.

The year in Review (Doug Noland) Skip to the last section at the bottom. Reader Paul M. points to Doug’s comment that healthy corporate leverage ratios are misleading because their customers (and the system in general) are still leveraged to the hilt.

Australian lotto winner keeping it real (Paddenburg, Couriermail) axes holiday weight gain members (BBC) Quotable from the founder: “Letting fatties roam the site is a direct threat to our business model…” Wow.

10 sci-fi weapons that actually exist (Wired)



Buffett not only paid a premium and what appears to be a pretty rich price for BNI but a portion of the deal is with Berkshire Hathaway stock. Apparently he thinks BNI, even at $100/share, and Kraft are cheaper than his own stock.

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Unemployed Japanese living in 30sqft “capsules”

Jan 2, 2010 03:10 UTC

Sad/fascinating piece from Hiroko Tabuchi in NYT: For some in Japan, Home is a tiny plastic bunk

For Atsushi Nakanishi, jobless since Christmas, home is a cubicle barely bigger than a coffin — one of dozens of berths stacked two units high in one of central Tokyo’s decrepit “capsule” hotels….

Now, Hotel Shinjuku 510’s capsules, no larger than 6 1/2 feet long by 5 feet wide, and not tall enough to stand up in, have become an affordable option for some people with nowhere else to go as Japan endures its worst recession since World War II.

Such quarters are surprisingly expensive: $640 per month. About $20 per square foot per month. A 650 square foot one bedroom in a good Manhattan neighborhood — the most expensive rental market in the U.S. I’m sure — probably averages about $2500. Less than $4 per sqft per month.

The comparison is not totally fair. These are technically hotels, not apartments.  Still, I think it’s worth making because the article says many now stay months on end.

Tabuchi doesn’t mention how widespread such hotels are in Japan, though his use of the plural in his opening paragraph suggests this isn’t the only one of its kind. He does mention Japan’s “hidden” homeless, noting that many overnight in internet cafes.

Make sure to see the slideshow attached to the article. The “capsules” may be 6.5 feet long, but sure don’t look 5 feet wide.


… and unemployed Americans live in cars.

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Lunchtime Links 12-31

Dec 31, 2009 16:53 UTC

Bankers get $4 trillion gift from Barney Frank (Reilly, Bloomberg) David pours over HR 4173, all 1,279 pages of it. He finds some interesting nuggets. One of the bigger problems I see is the proposed insurance fund that would pay for resolving systemically dangerous banks. Talk about moral hazard!

Show some balls (Saletan, Slate) A colorful take on new TSA security procedures.

New jobless claims hit 17-month low (Kaiser, Reuters) Good news for the economy but, paradoxically, bad news for stocks (and gold). If the economy improves, the Fed will have to raise rates. That will hit equity values and strengthen the dollar. But don’t count on strength lasting very long. As soon as the Fed meaningfully tightens, we’ll head right back into debt deflation…..which is why many think the Fed is trapped.

The land of the rising bearish wager (Zuckerman/Slater, WSJ) Betting on a “sudden stop” in Japan. (ht Walker Todd)

Shoplifters? Keen an eye on workers (Greenhouse, NYT)

UBS whistleblower asks why he’s going to prison (Brown, Reuters) This will be an interesting 60 Minutes piece.

Europe’s vast farm subsidies face challenges (Castle/Carvajal, NYT)

How corruption stalks the stimulus (IBD) The IRS can track who is actually eligible for many of the tax breaks offered as part of stimulus measures…

The maker of the Times Square ball filed for bankruptcy in 2009 (TrueSlant) The story says they filed last January, yet they’re still making the ball. There is life after bankruptcy….

IKEA job interview (imgur)

Train travels through market (reminds me of this video posted previously)

train market

Economic calcification, Japanese edition

Dec 7, 2009 20:12 UTC

Japan’s labor market is desperately troubled. For years, the number of temporary workers has been on the rise as Japanese employers find it harder to afford full-timers. Like the rest of the Japanese economy, the labor market needs the flexibility to deflate. But the government won’t allow that to happen. The latest example is a proposal to ban manufacturers from hiring temporary workers (Otsuma/Hagiwara, Bloomberg):

The government is preparing legislation “that will stop manufacturing firms from employing temps and encourage them to hire full-timers,” [Health and Labor Minister Akira] Nagatsuma said yesterday on a business program….

Japanese companies have cut jobs to remain profitable in an economy struggling with deflation and as a strengthening currency erodes export earnings. Unemployment [recently at 5.1%] rose to a postwar high 5.7 percent in July…

Effectively, the Japanese government is trying to put a price floor underneath the labor market. But banning “temporary” work won’t help full-time employment; it will just mean less employment overall.

Japan’s plan is not unlike measures being employed to prop up the U.S. housing market. The problem with price floors is that in preventing markets from clearing, they prevent transactions from happening. Fewer transactions means less economic activity. It means fewer jobs.

price floor

The numbers in the chart are for illustration purposes only, but the numbers from the Japanese labor market demonstrate suggest precisely this kind of economic calcification:

The proportion of [Japanese] college students with job offers tumbled 7.4 percentage points from a year earlier to 62.4 percent, an Education Ministry report showed last month, the steepest drop since the survey started in 1996.

Younger folks supporting Obama’s various stimulus measures don’t appreciate the negative long-term consequences for their employment prospects.

Stimulus and/or regulations that direct capital to zombie employers/employees are just as destructive as bailouts to zombie banks. Both deny capital to those that COULD put it to more efficient use.


In other Japan news: Japan to give JAL $7.7 billion loan guarantee (Kajimoto, Reuters)

Japan’s government plans to guarantee about 700 billion yen ($7.7 billion) in loans and other funds provided by financial institutions to keep Japan Airlines Corp. afloat, the Nikkei business daily reported….

The plan is aimed at keeping JAL from having to suspend scheduled flights due to a shortage of operating funds, Nikkei said.

WSJ: Japan passes moratorium on loan repayments

Nov 30, 2009 20:35 UTC

Interesting item from Alison Tudor:

Japan passed into law Monday a conditional moratorium on loan repayments by small businesses and home owners, a move that opponents say may lead to an increase in bad loans on the books of the country’s banks.

The bill, which has been in the works since the Democratic Party of Japan came to power in September, was passed by the upper house of Japan’s parliament on Monday, according to a spokesman at the Japanese banking regulator the Financial Services Agency.

The law is designed to encourage financial institutions to change the terms of loans when asked, though lenders aren’t required to do so. Opponents believe it still could put public pressure on banks to forgive payments, leading to an increase in nonperforming loans on bank balance sheets.

While Treasury is pressuring banks to make trial mods permanent, Japan wants to help out the little guy by encouraging banks to forgive loan repayments. Just another reminder that after two decades, Japan’s zombie economy is still struggling to extricate itself from an ’80s credit bubble.

“Forgiveness” is another word for writeoff. And debt writeoffs (accompanied by proper bank recapitalizations) are necessary to reboot the credit system. But “encouraging” creditors to do so won’t do much good. They have little incentive to forgive principal so long as macroeconomic policy rolls over debt perpetually.

There’s an uncomfortable truth to grapple with for those of us who didn’t get caught up in the housing/consumption bubble but instead built up savings. Depending on where those savings ended up, WE are the shareholders/creditors that by right should lose when the system gets recapped.

Nothing gets fixed till everyone takes a haircut.

Part of the appeal of gold, silver, raw land and other tangible assets is that it gets investors “out of the system” before that happens.


Waiting for Japan to blow up is stressful. It looms, and it is impossible for me to see the economic future beyond that event.

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Peering into our future…

Aug 28, 2009 14:10 UTC

A WSJ article on Japanese elections comes with the following table.


Japan has spent 20 years fighting deflation with loose monetary policy and deficit spending. To what end?

Keynesians point to Japan’s experience as evidence that the U.S. government can borrow much more before interest rates rise. I suspect they’re right. But what’s the point if, at the end of all of that, we’re saddled with unpayable debts?

Sure, deficit spending prevented more violent economic upheaval last year. But the more debts we build up, the longer and deeper the downturn will prove to be over time.

The article has many interesting details…

  • The party that’s been in power for 59 years will likely lose the elections to another, which promises “ambitious spending programs” despite Japan’s huge debt.
  • Incomes continue to fall. Inflated artificially by a credit bubble, Japan’s per capita income once ranked 4th in the world, but has since fallen to 14th.
  • Declining birth rates mean younger Japanese don’t have the voting power to reduce entitlement spending that’s asphyxiating the economy.

My hope is that America finds the political will to deal with debt. If we don’t, even matching Japan’s sorry trajectory will be tough.


Dear friend,
I can accept of your article by 50 percent ratio.
One basic reason for Japan!s economic crisis is that,whatever they used to produce is for export purposes.
She was mainly depended on American Markets.To add that,Now,China is producing,assembling on many electronic,communication devices,agricultural implements,auto spare parts and very strong on small manufacturing products on very cheaper,highly competitive bidding-all created some panic,set back in Japan!s exports.
Many financial institutions were in shaky positions.
Now, I came to know that,very long Ruling party is defeated by her main,strong Opposition Party in recent general elections.
New Prime Minister will bring a stable economic structure and do more protection to its citizens.